Custom, Excise & Service Tax Tribunal
Computer Sciences Corporation India ... vs Ce & Cgst Noida on 1 April, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.52075 of 2015
(Arising out of Order-In-Original No.20/Commissioner/Noida/2014-15 dated
27/01/2015 passed by Commissioner, Service Tax, Noida)
M/s Computer Science Corporation India Pvt. Ltd.
.....Appellant
(A-44/45, Sector 62, Noida
Uttar Pradesh-201301)
VERSUS
Commissioner of Service Tax, Noida ....Respondent
(C-56/42, Sector 62, Noida, Uttar Pradesh)
APPEARANCE:
Shri Atul Gupta, Advocate for the Appellant
Shri A.K. Choudhary, Authorized Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.-70162/2024
DATE OF HEARING : 01.04.2024
DATE OF DECISION : 01.04.2024
SANJIV SRIVASTAVA:
This appeal is directed against Order-In-Original
No.20/Commissioner/Noida/2014-15 dated 27/01/2015 passed
by Commissioner, Service Tax, Noida. By the impugned order
following has been held:-
ORDER
1. I confirm the demand of Service tax Rs. 7,80,44,124/- (Rupees Seven Crore eighty Lakhs forty four thousand one hundred twenty four only) (inclusive of Edu. Cess and SHEC)for the period from March 2009 to June, 2013, under Section 73(2) of the Finance Act 1994.
2. I order the recovery of interest as prescribed rates on the above amount under the provisions of Section 75 of the Finance Act, 1994 as amended.
2Service Tax Appeal No.52075 of 2015
3. I also impose penalty of 7,80,44,124/- (Rupees Seven Crore eighty Lakhs forty four thousand one hundred twenty under Section 78 of the Finance Act 1994. four only)
4. I hereby impose a penalty of Rs. 10,000/- (Rupees ten thousand) under Section 77 of Finance Act, 1994.
2.1 The appellant is registered for providing various taxable services namely Management Consultants, Consulting Engineer, Manpower Recruitment Agency, Online Information and Data Retrieval services, Commercial Training & Coaching, Maintenance and Repair services, Erection Commissioning & Installation, Business Auxiliary Services, Sponsorship services, Business Support Services, Information Technology Software Services falling under Section 65 of the Finance Act, 1994.
2.2 During the course of audit of record of the appellant for the period March, 2009 to March 2010 it was observed that that the party have not paid service tax of Rs. 2,06,99,389/- on an amount in the foreign exchange equivalent to INR 17,84,35,798, pertaining to communication expenses paid to their related parties based in different foreign countries. Further, it was gathered that the payments relate to service provided by different service providers based in foreign countries viz. M/s Global Crossing and M/s Tetra who have provided Data Linkage Connectivity between all CSC locations around the world including the assessee through Cloud (a kind of web). Such services/activities are taxable as "Internet Telecommunication Service". These charges are in the nature of Remote Access Charges which these service providers charge from the foreign arms of CSC who in turn get reimbursed from the assessee.
2.3 After investigation in the matter and alleging suppression a show cause notice dated 25.02.2014 was issued to the appellant asking them to show cause as to why:-
"(i) Service tax Rs. 7,80,44,124.00 (Rs. Seven Crore Eighty Lacs Forty Four Thousands One Hundred Twenty Four only) (inclusive of Edu. Cess & H Edu. Cess) should not be demanded and recovered from them under proviso to Section73(1) of the Finance Act, 1994;3
Service Tax Appeal No.52075 of 2015
(ii) the interest on the above amount at appropriate rate should not be recovered under Section 75 of the Finance Act, 1994;
(iii) the penalty should not be imposed on them under Section 76, 77 & 78 of the Finance Act, 1994 for the offences appear to have been committed by them as discussed hereinabove."
2.4 The show cause notice was adjudicated as per the impugned order referred in Para 1 above.
2.5 Aggrieved appellant have filed this appeal.
3.1 We have heard Shri Atul Gupta, Advocate for the appellant and Shri A.K. Choudhary, Authorized Representative for the Revenue.
3.2 Arguing for the appellant learned counsel raised various issued with regards to as mentioned below:-
o The SCN is based on Presumption and assumption, o The impugned order has been passed in violation of the Principles of Natural Justice.
o The services received by the appellant are not "Internet Telecommunication Services" but "Telecommunication Services".
o Burden of proof of that the impugned service falls under Internet Telecommunication services as defined by Section was on the department for charging service tax, which has not been discharged.
o Nature of services received.
● Audio Conferencing Cost ● Data Lines Cost ● Remote Access Server (RAS) Charges o No proper basis has been provided for classifying the services under the category "Internet Telecommunication Services".
o Being Telecommunication Services, the services received are not taxable.4
Service Tax Appeal No.52075 of 2015 o In absence of consideration paid to AT&T and Global Crossing by the Appellant, no service tax is leviable. o The extended period of limitation is not invocable as there was no suppression of facts. Hence, the demand is wholly without jurisdiction and ought to be dropped. o No penalty is imposable as the extended period of limitation is not invocable.
o No penalty is imposable, the benefit of Section 80 of the Finance Act may be available to the Appellant.
3.3 Arguing for the Revenue learned Departmental Representative reiterates the finding recorded in the impugned order.
4.1 We have considered the impugned order along with the submissions made in the appeal and during the course of argument.
4.2 On merits the issue is whether the services provided by the appellant shall be classified under the category of "internet telecommunication services" as per Section 65 (57a) of the Finance Act, 1994 for the purpose of levy of service tax. The said definition is reproduced below:
"65 (57a) "internet telecommunication service" includes,-
(i) internet backbone services, including carrier services of internet traffic by one Internet Service Provider to another Internet Service Provider,
(ii)internet access services, including provision of a direct connection to the internet and space for the customer's web page'
(iii) provision of telecommunication services, including fax, telephony, audio conferencing and video conferencing over the internet;
From the perusal of the above definition, it is evident that the definition is an inclusive one and not an exhaustive definition. The definition uses the phrase "includes" and not "means". Section 65 (105) (zzzu) defines the taxable service, in this category as "to any person, by any other person in relation to internet telecommunication service."
5Service Tax Appeal No.52075 of 2015 4.3 Section 65 (109a) of Finance Act, 1994 as amended defined "Telecommunication Services as follows:
"Telecommunication service" means service of any description provided by means of any transmission, emission or reception of signs, signals, writing, images and sounds or intelligence or information of any nature, by wire, radio, optical, visual or other electro-magnetic means or systems, including the related transfer or assignment of the right to use capacity for such transmission, emission or reception by a person who has been granted a licence under the first proviso to sub- section (1) of section 4 of the Indian Telegraph Act, 1885 (13 of 1885) and includes--
(i) voice mail, data services, audio tex services, video tex services, radio paging;
(ii) fixed telephone services including provision of access to and use of the public switched telephone network for the transmission and switching of voice, data and video, inbound and outbound telephone service to and from national and international destinations;
(iii) cellular mobile telephone services including provision of access to and use of switched or non-
switched networks for the transmission of voice, data and video, inbound and outbound roaming service to and from national and international destinations.
(iv) carrier services including provision of wired or wireless facilities to originate, terminate or transit calls, charging for interconnection, settlement or termination of domestic or international calls, charging for jointly used facilities including pole attachments, charging for the exclusive use of circuits, a leased circuit or a dedicated link including a speech circuit, data circuit or a telegraph circuit;
(v) provision of call management services for a fee including call waiting, call forwarding, caller identification, three-way calling, call display, call return, call screen, call blocking, automatic call-back, call answer, voice mail, voice menus and video conferencing;
(vi) private network services including provision of wired or wireless telecommunication link between specified points for the exclusive use of the client;
(vii) data transmission services including provision of access to wired or wireless facilities and services specifically designed for efficient transmission of data; and 6 Service Tax Appeal No.52075 of 2015
(viii) communication through facsimile, pager, telegraph and telex, but does not include service provided by-
(a) any person in relation to on-line information and database access or retrieval or both referred to in sub- clause (zh) of clause (105);
(b) a broadcasting agency or organisation in relation to broadcasting referred to in sub clause (zk) of clause (105); and
(c) any person in relation to internet telecommunication service referred to in sub-clause (zzzu) of clause (105)."
The taxable service under this category has been defined by Section 65 (105) (zzzx) "to any person, by the telegraph authority in relation to telecommunication service".
4.4 Appellant as such was not the service provider but the service recipient, and is required to pay the service tax as importer of the service, in terms of Section 68 (2) of the Finance Act, 1994 under reverse charge mechanism. It is submission of the appellant, that as per their understanding they were not liable to pay service tax under this category, because:
(a) Though the nature of service provided was covered by the "Telecommunication Service", however, the service provider was not the telegraph authority, which was necessary at that time for the service to be covered by definition of taxable service under the category of telecommunication service.
(b) The service provider and service receiver both were situated outside India;
(c) The CSC Overseas was not the provider of any service, the payment was made only of the reimbursement cost.
4.5 The audit of the appellant was conducted for the periods 2006-07, 2007-08 and 2008-09 by both the officers of Internal Audit Officers of the department as well as the 7 Service Tax Appeal No.52075 of 2015 officers of CERA, UP. The issue was raised in the audit and was constantly in communication with the revenue. They responded to the queries raised expressing their view and opinion in the matter. Their contention was not accepted by the revenue and show cause notice was issued to the appellant on 25.02.2014, invoking extended period of limitation as per proviso to Section 73 (1) of the Finance Act, 1994.
4.6 We find that the show cause notice does not lay down the grounds for invocation of extended period of limitation as per proviso to Section 73 of the Finance Act, 1994. Para 8 of the show cause notice which is the only paragraph in this regard is reproduced below:-
"8. Since, as above the party has not paid service tax leviable upon them, thus, it appears that service tax as discussed in foregoing paras is recoverable from the party alongwith interest under section 75 of Finance Act'1994 and they have rendered themselves for penalty as prescribed under section 76 of Finance Act'1994. It further appears that the party is willfully avoiding the submission of the requisite documents to the department and have been suppressing the facts of receiving service from a service provider located outside India, by not disclosing the same in statutory returns, with intend to evade payment of service tax, thus extended period under proviso to Section 73(1) of the Finance Act, 1994 appears to be applicable to this case. Further, since the party did not submit requisite information called by the department, they appear to be liable for penal action as provided under section 77 of the Finance Act, 1994. And as the party did not discharged their service tax liabilities and have thereby evaded service tax in contravention of the statutory provisions, they have and have rendered themselves liable for penal action under Section 76 and 78 of the Finance Act. 1994."
4.7 The issue has been discussed in the impugned order in Para 4.11 & 4.12 and the same is reproduced below for ready reference:-
"4.11 The assessee has contended that even if the amount of such services are assumed to be taxable in the hands of the assessee under reverse charge mechanism and the service tax is deposited under reverse charge 8 Service Tax Appeal No.52075 of 2015 mechanism, it would be a revenue neutral exercise since The assessee would be eligible for taking cenvat credit and refund of the service tax amount deposited by CSC India.. In this context, I found that the authority and the limitation of the collection of tax are enshrined in Article 265 of the Constitution of India. Chapter V and VA of the Finance Act, 1994 (as amended by subsequent Finance Acts) provides for the levy of service tax and constitute the law governing service tax. On the other hand, the to grant relief in case of cascading effect of taxation, the facility of CENVAT credit/ refund provided to the assessee, subject to certain provisions. The basic concept to provide CENVAT credit facility to the assessee is to integrate Central Level taxes in a single value added tax regime. As the claim of CENVAT credit is dependent on the stage of receipt of goods and services. The provisions of levy of tax on the taxable services provided at nowhere restricted if CENVAT facility available to the assessee. When any tax is levied on goods / services, the assessee must have to discharge their liability of tax and then they may avail CENVAT credit to avoid cascading effect. This fact also confirmed by the Hon'ble CESTAT' in case of Harsh International (P) Ltd. Vs. CCE reported in 2011 (269) ELT 225 (tri. Del). So, I found that the decisions quoted by the assessee are of no help to the assessee and the service tax is rightly demanded in the impugned show cause notice.
4.12 The assessee has further submitted that extended period of limitation requires suppression to be proved and this onus has not been discharged in the SCN. There was never any willful suppression or misstatement of facts by CSC India. Hence, allegation with regard to suppression and intention to evade tax is contrary to facts. Accordingly the demand cannot be sustained. In this regard, I find that the assessee had never disclosed the correct taxable value of the services received from service providers located outside India, neither in ST-3 return filed by them nor in any other documents with intend to evade service tax. It has come to notice only during the audit of the documents of the assessee that the service tax was not paid by them to the above extent, the contention of the assessee that they have provided all the information as required by the audit is not correct as evident from the fact that the assessee has not provided willfully, all required information, till issue of several correspondence and two summons, with intend to evade service tax. Therefore, I found that the assessee have willfully suppressed the facts with intent to evade payment of service tax and therefore extended period under proviso to Section 73 (1) of Finance Act was correctly been invoked to recovery of service tax with interest under 9 Service Tax Appeal No.52075 of 2015 Section 75 of the Act ibid.. I would like to discuss the judgement of the Hon'ble High Court Calcutta in the case of Naresh Kumar & Co. Pvt. Ltd. Vs. Union of India reported in 2014 (36) S.T.R. 271 (Cal.) which is relevant in the instant case, wherein it is held that, "28. the extended period of limitation can be invoked when there is a conscious act to evade tax, for example deliberate non-disclosure of some bills pertaining to any particular taxable service rendered by the assessee. Similarly, if an assessee withholds information in spite of requisition to provide the same, with intention to evade tax, the assessee would be guilty of willful suppression."
In this regard, the assessee also relied upon various decisions of courts as discussed supra. I find that the facts and circumstances of he cases are different from this case, so, I find that the ratio of the decisions is not applicable in this case."
4.8 The period of demand is from April 2008 to June 2012, as after the change in regime of levy service tax to negative list of services, appellant started paying the service tax on the said services received by them. All the facts including the documents, balance-sheet and other records pertaining to the disputed services were in knowledge of the Revenue and also audited during the course of audit for the period February 2010. There is correspondence also available at Page 89 & 90 of the paper-book whereby information in respect of audit objection was called from the appellant vide letter dated 16.03.2011 which was responded by the letter dated 19.05.2011 when the entire issue was in correspondence as a sequel of audit conducted Revenue could not have proceeded to issue a notice by invoking extended period of limitation alleging suppression. Even the decision of Naresh Kumar relied upon by the Commissioner in Order-In- Original says so there has to be a deliberate non-disclosure for invoking extended period. The law in this regard has been settled in various decisions of the Hon'ble Apex Court. Some of the judgments are mentioned below:-
➢ Pushpam Pharmaceuticals Co. [1995 (78) E.L.T. 401 (S.C.)] 10 Service Tax Appeal No.52075 of 2015 "4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression."
➢ Anand Nishkawa [2005 (188) E.L.T. 149 (S.C.)] "27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that "suppression of facts" can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty, when facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to Section 11A of the Act. We are, therefore, of the firm opinion that where facts were known to both the parties, as in the instant case, it was not open to the CEGAT to come to a conclusion that the appellant was guilty of "suppression of facts". In Densons Pultretaknik v. Collector of Central Excise [2003 (11) SCC 390], this Court held that mere classification under a different sub-heading by the manufacturer cannot be said to be willful mis-statement or "suppression of facts". This view was also reiterated by this Court in Collector of Central Excise, Baroda v. LMP Precision Engg. Co. Ltd. [2004 (9) SCC 703].
11Service Tax Appeal No.52075 of 2015
28. However, in the case of LMP Precision Engg. Co. Ltd. (supra), this Court came to the conclusion that the manufacturer was guilty of "suppression of facts." In that decision, manufacturer did not make any attempt to describe the products while seeking an approval of classification list and in that background of facts, it was held that it amounted to "suppression of facts" and therefore, Excise authorities were entitled to invoke proviso to Section 11A of the Act. It also appears from that decision that this Court also held that if any classification was due to mis-interpretation of the classification list, suppression of facts could not be alleged. From this judgment, it is therefore clear that since the Excise authorities had collected samples of the products manufactured by the appellant and inspected the products and the relevant facts were very much in the knowledge of the Excise authorities and nothing could be shown by the Excise authorities that there was any deliberate attempt of non-disclosure to escape duty, no claim as to "suppression of facts" could be entertained for the purpose of invoking the extended period of limitation within the meaning of proviso to Section 11A of the Act.
29. Similarly, in the case of Collector, Central Excise, Jamshedpur v. Dabur India Ltd. [2005 (121) ECR 129 (SC)], this Court held that the extended period of limitation was not available to the Department as classification lists filed by the Assessee were duly approved by the authorities from time to time. In that decision this Court followed its earlier judgment in O.K. Play (India) Ltd. v. Collector of Central Excise, Delhi-III (Gurgaon) [2005 (66) RLT 657 (SC)], held that in cases where classification lists filed by the Assessee were duly approved, the extended period of limitation would not be available to the Department."
➢ EMAAR MGF Land Ltd. [2023 (74) G.S.T.L. 212 (Del.)] "19. It is apparent from the above that the proviso to Section 73(1) of the Act is applicable only where it is found that the service tax has not been levied or paid or has been short levied or short paid or erroneously refunded by reason of fraud; collusion; wilful mis-statement; or suppression of facts; or contravention of the provisions of the Act and the Rules made thereunder with the intention to evade payment of service tax. In the present case, there is no allegation of any fraud or collusion. It is also apparent from the order-in-original that the Commissioner had proceeded on the basis that the proviso would be applicable notwithstanding that there was no intent on the part of the respondent to evade any tax. The Commissioner had proceeded on the basis that the extended period of limitation was applicable on account of suppression of facts and "wilful misstatements".
12Service Tax Appeal No.52075 of 2015
20. In the circumstances, the Tribunal had examined the question whether the proviso to Section 73(1) of the Act was applicable on account of any wilful mis-statement or suppression of facts. According to the respondent, the services rendered by it were covered under the taxable service of 'Works Contract' Services. It had, accordingly, filed its return disclosing that its services were covered under Section 65(105)(zzzza) of the Act.
21. Clearly, there was no suppression as to the activities being carried out by the respondent. It is also relevant to note that the respondent's contention that its services were covered under the 'Works Contract' Services is not insubstantial. In cases where another interpretation is plausible and an assessee proceeds to file a return on that basis, it would not be apposite to conclude that the assessee has made any mis-statement or suppressed any fact merely because the Revenue interprets the statutory provision differently. This is notwithstanding that the Revenue may finally prevail in its interpretation of the statutory provisions and the assessee may not. Mis-statement and suppression of facts must necessarily be examined from the perspective of sufficient disclosure or statements of facts and not contentious interpretations of statutory provisions. Once an assessee has truly disclosed the facts, it would not be apposite to invoke the provisions of Section 73(1) of the Act only on the ground that the assessee has classified its services under a head which the revenue considers erroneous. However, if such classification is, ex facie, untenable and done with the intent of evading any liability, the provisio to Section 73(1) of the Act, would be applicable. If the assessee's interpretation of the statutory provision is a reasonable one and the assessee has disclosed material facts, it would be erroneous to apply the proviso to Section 73(1) of the Act on account of mis- declaration or suppression of facts."
➢ Mahanagar Telephone Nigam Ltd.[2023 (73) G.S.T.L. 310 (Del.)] "31. Indisputably, the contention that service tax is not chargeable on the compensation received is not without substance. Since it was MTNL's understanding that the compensation received was not a consideration for any taxable service but for the surrender of spectrum, MTNL could not be expected to disclose the compensation as consideration for service in its Service Tax Returns. Plainly, there was no requirement for MTNL to do so.
32. As noted above, the impugned show cause notice discloses that the respondents had faulted MTNL for not approaching the service tax authorities for clarification. The respondents have surmised that this would have been the 13 Service Tax Appeal No.52075 of 2015 normal course for any person acting with common prudence. However, it is apparent from the statements of various employees of MTNL that MTNL did not believe that the amount of compensation was chargeable to service tax and therefore, there was no requirement for seeking clarifications. Further, there is no provision in the Act which contemplates any procedure for seeking clarification from jurisdictional service tax authority. Clearly, the reasoning that MTNL ought to have approached the service tax authority for clarification, is fallacious.
33. It is also important to note that MTNL had declared the receipt of compensation as income in its books of account. The final accounts of MTNL are in public domain. In the circumstances, the allegation that MTNL had suppressed any material facts from the Service Tax Department is wholly without any basis.
34. Mr. Harpreet Singh, Learned Counsel appearing for the respondents, submitted that the allegation that MTNL had suppressed material facts was based on non-disclosure of the receipt of compensation in its service tax returns. However, he did not contest the contention that there is no provision in the Act to disclose receipt of any funds in the service tax returns, which are not regarded as consideration for rendering services (whether taxable or exempt). In the circumstances, there is no basis for the allegation that MTNL had suppressed any material facts. Mere non-disclosure of a receipt, which a party believes is not chargeable to service tax, in the service tax returns, would not constitute suppression of facts within the proviso to Section 73(1) of the Act, unless it is, ex facie, clear that the receipt is on account of taxable services or it is unreasonable for any assessee to believe that the receipt does not fall in the net of service tax. In cases where there is a substantial dispute as to whether receipt of any amount is on account of taxable service - as in the present case - the non-disclosure of the same in the service tax return cannot, absent anything more, lead to the conclusion that the assessee is guilty of suppression of facts to evade tax."
4.9 As we do not find any reason for which an extended period of limitation could have been invoked in the present case the entire demand should fail on this ground itself. Without going into the merits of the case for which learned counsel submits there are certain decisions in their favour we hold that demand is barred completely by limitation.
14Service Tax Appeal No.52075 of 2015 4.10 Since we hold that the demand is barred by limitation the penalties imposed on the appellant too are set aside.
5.1 Appeal is allowed.
(Dictated and pronounced in open court) (P. K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) Nihal